Some additional information about HIV/AIDS in the United States is available here.

The six witnesses for the hearing are expected to discuss the crisis of affordability of and access to antiretroviral treatment (ART), and to evaluate the new paradigm to reward R&D that is presented in S.1138. This includes the elimination of product monopolies in favor of more than $3 billion per year in innovation inducement prizes for the development of new treatments for HIV/AIDS.

The witness are:

Dr. Mohammed Akhter, Director, DC Department of Health; Executive Director of the American Public Health Association from 1997-2002; Washington, DC

Frank Oldham, Jr., President and CEO, National Association of People Living With AIDS; Washington, DC

Suerie Moon, Research Director and Co-Chair of the Forum on Global Governance for Health, Harvard Global Health Institute and Harvard School of Public Health; Cambridge, MA

Joseph Stiglitz, Professor at Columbia University; winner of the Nobel Prize in Economics; former chairman of the Council of Economic Advisors and a chief economist for the World Bank; New York, NY

Lawrence Lessig, Professor at Harvard Law School; founder of Creative Commons and the Stanford Center for Internet and Society; Cambridge, MA

S.1138 is one of several initiatives underway since 2002 to de-link R&D costs from drug prizes. The de-linkage concept is increasingly being seen as key to efforts to expand access to new medical inventions, and to address the many inefficiencies in the current R&D paradigm, such as the over emphasis on medically unimportant "me too" products, excessive spending on marketing, and the proliferation of patent thickets on upstream product development.

History of the bill

Working with the Consumer Project on Technology and others, Senator Sanders first drafted a medical innovation prize fund bill in 2004, and introduced the bill in the House of Representatives in 2005 as HR 417, 109th Congress. The original bill was aimed at the entire US market for FDA approved prescription drugs. In subsequent years, Sanders has reintroduced the bill with various modifications. In 2011, Sanders introduced two new versions of the prize fund approach, including S.1137 and S.1138. Both of the 2011 versions incorporate the more sophisticated prize fund designs, including the open source dividend and the competitive intermediaries for upstream prize management, which are similar to provisions in various prize proposals now being considered by the World Health Organization in the context of its Public Health, Innovation and Intellectual Property negotiations. (More here: http://www.keionline.org/node/1398).

In April 2012, the Senate HELP Committee adopted an amendment to the PDUFA reauthorization bill that would require the National Acadameies to evalute the prize fund approach as a solution to the innovation and affordability challenges for HIV/AIDS drugs, antibiotics, or drugs in general.

Funding
The size of the prize fund for HIV/AIDS would be 0.02 percent of the gross domestic product of the United States. The money for the prize fund would come from governments and health insurance providers, according to:

The ratio of the number of persons receiving treatments for HIV/AIDS that are insured in the private sector to the number of persons receiving treatments for HIV/AIDS who received insurance or reimbursements or care from the public sector.

Prize Design
The prize fund money would be used to pay for :

End product prizes. These are rewards for products that receive FDA approval and which are used market. To be eligible to receive an end product prize a person shall be-

(1) in the case of a qualifying treatment for HIV/AIDS that is a drug or biological product, the first person to receive market clearance with respect to the drug or biological product;
(2) in the case of a manufacturing process for a qualifying treatment for HIV/AIDS, the holder of the patent with respect to such process;

Section (b) of the bill sets out a number of criteria for such prizes. Among them:

A new product or process is eligible to receive such prizes for 10 years.

The prizes would be based upon the number of patients using products, and the "incremental therapeutic benefit of the qualifying treatment," benchmarked against existing therapies, or for the benefits of the new process.

There would be a cap on the amount that any single product could receive.

Open Source Dividend Prizes.. At least 5 percent of the prize money will be allocated to "open source dividends," to reward "the persons or communities that openly shared knowledge, data, materials, and technology on a royalty-free and nondiscriminatory basis." The system for managing the open source dividends would include "time-limited period of nominations for persons or communities whose contributions were considered useful, including the evidence to support such nominations to describe the significance of the contribution." These prizes, which would be greater than $150 million per year at current levels of GDP, would create a powerful economic incentive to open source knowledge, data, materials and technology, which should directly benefit product developers.

Decentralized management of upstream prizes, by competitive intermediaries.. The prize fund will have the possibility of authorizing multiple non-profit entities to manage parts of the prize fund, to either manage some of the funds for the open source dividend prizes, or to give prizes for upstream R&D projects. This money will be given to "communities that provide open, nondiscriminatory, and royalty-free licenses to relevant intellectual property rights." The competitive intermediaries would be funded by private sector employers.

Section 10(a). Such intermediaries shall compete for funding from non-Federal entities that co-fund the Fund.